SFO Prevails In First Contested Overseas Corruption Trial

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The U.K.’s Serious Frauds Office prevailed in its first overseas corruption trial, securing a jury verdict in its favor and against two former Innospec executives. The case stems from a referral by the DOJ following FCPA investigation conducted by the Department and the SEC. The verdict also brings to a close the long running corruption investigations involving the company.

The SFO’s case was brought against Dennis Kerrison and Mitiades Papachristos. Mr. Kerrison is a former CEO of Innospec Limited. Dr. Papachristos is the former Regional Sales Director for the Asia Pacific region. Both were charged with, and convicted of, conspiracy to commit corruption.

The underlying scheme took place over a six year period beginning in 2002. During that period bribes were paid to government officials in Indonesia in connection with the sale for Innospec products which included Tetraethyl Lead or TEL. That substance is a highly dangerous compound created as an octane booster to be added to engine fuel. Leaded fuel that contained the substance was banned in the U.K. in 2000. Although the Indonesian government wanted to eliminate the use of TEL, the bribery scheme significantly extended its use in that country. Both defendants were implicated in the bribes.

The SFO previously obtained three guilty pleas in this action. In March 2010 the company pleaded guilty to bribing state officials in Indonesia. It was fined $12.7 million. In June 2012 Paul Jennings, another former Innospec CEO pleaded guilty to two charges of conspiracy to commit corruption and a further charge of conspiracy to commit corruption in July 2012. David Turner, a former Innospec Sales and Marketing Director pleaded guilty to three charges of conspiracy to commit corruption in January 2012.

The sentencing for the four individual defendants is expected to take place on July 25, 2014. This will conclude the SFO’s investigation related to Innospec.

In March 2010 Innospec, Inc, pleaded guilty to defrauding the United Nations and to violating the FCPA as well as the U.S. embargo against Cuba. The company pleaded guilty to a 12 count information charging wire fraud tied to kickbacks paid to the former Iraqi government under the UN Oil for Food Program and FCPA violations in connection with bribe payments made to officials in the Iraqi Ministry of Oil. The company also admitted selling chemicals to Cuban power plants in violation of the embargo. Innospec at the time was the only manufacturer of TEL. The firm agreed to pay a $14.1 million criminal fine, to the instillation of a compliance monitor and to install a robust compliance program. U.S. v. Innospec Inc., Case No. 1:10-cr-00061 (D.D.C. March 18, 2010).

Innospec also settled with the SEC. That action was based on bribes paid in Iraq and Indonesia to sell its chemicals. The company resolved the case, consenting to the entry of a permanent injunction prohibiting future violations of the bribery and books and records and internal control provisions. It also agreed to pay $60,071,613 in disgorgement, most of which was waived. In addition, Innospec agreed to pay $2.2 million to OFAC. The criminal fine were based in part on the financial condition of the company. SEC v. Innospec, Inc., Civil Action No. 1:10-cv-00448 (D.D.C. Filed March 18, 2010); see Lit. Rel. No. 21454 (March 18, 2014). See also SEC v. Jennings, Case No. 1:11-cv-00144 (Filed January 24, 2011)(settled FCPA action against Paul Jennings, former company CEO and CFO).

 

Topics:  Compliance, Corruption, DOJ, FCPA, Foreign Official, SEC, SFO

Published In: General Business Updates, Criminal Law Updates, Finance & Banking Updates, International Trade Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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